Channel 4 profits slump by 70%

Channel 4 has blamed declining advertising revenues and higher spending on digital TV for a 70% decline in its profits to £14.5 million in 2006.

The group, which released its annual report today, increased spending on programmes from £573 million to £608 million, with £125 million of the total spent on annual entertainment shows like Big Brother.

Channel 4 director of television Kevin Lygo indicated that its spend on US imports like Ugly Betty will be the first area to be cutback.

The channel's acquisitions spend rose from £112.9 million in 2005 to £127.2 million last year, but the number of programming hours such shows took up fell from 3,382 to 3,278.

Meanwhile, revenues from advertising sales and sponsorship were flat at £824 million, but would have been lower had it not been for a £40 million jump in sales revenue for Channel 4's digital TV channels.

Lygo said the "superinflation" of programming and cost of hiring top talent was making things tougher.

The report also showed that chief executive Andy Duncan earned £1 million last year, including a £73,000 pay increase to £622,000, a £149,000 performance bonus and a £375,000 'long-term loyalty bonus' payout.

Luke Johnson, the channel's chairman, added that it would need more money from Government if it were to avoid reductions in programme quality.

He said: "Unless we receive some form of assistance to help us continue to adhere to our public service remit, we may be faced with a stark choice; either we will have to reduce our output of public service programming, and focus more of our schedule on commercial programmes, or see Channel 4’s finances continue to deteriorate."